Section 524(g) Bankruptcy Trusts
Section 524(g) of the United States Bankruptcy Code (11 U.S.C. § 524(g)), commonly known as the Manville Amendment, is the federal statute that authorizes the creation of asbestos bankruptcy trusts.[1] Enacted by Congress in 1994, this provision allows companies overwhelmed by asbestos litigation to establish and fund trusts during Chapter 11 reorganization to compensate both present and future asbestos-exposure claimants.[2] The statute's key innovation was the channeling injunction, which redirects all asbestos-related claims away from the reorganized company and into the trust, ensuring the company can emerge from bankruptcy while victims retain a dedicated compensation source.[3] Today, more than 60 active asbestos trusts hold over $30 billion in combined assets designated for present and future claimants.[4]
Section 524(g) bankruptcy trusts at a glance:
- Enacted in 1994 — Congress codified the Manville trust model into federal law as 11 U.S.C. § 524(g) after the Johns-Manville bankruptcy proved the concept[2]
- 60+ active trusts — more than 60 asbestos bankruptcy trusts currently operate under Section 524(g) authority, holding over $30 billion combined[4]
- $7,000 to $1.2 million per trust — individual mesothelioma claim values vary widely depending on the trust and disease severity[4]
- ~$180,000 median mesothelioma value — the midpoint scheduled value across major trusts before payment percentage adjustments[4]
- 75% supermajority required — at least 75% of current claimants must approve a Section 524(g) trust plan before it takes effect[2]
- Channeling injunction mechanism — the statute's core innovation redirects all asbestos claims from the reorganized company to the trust[3]
- Johns-Manville (1988) was the first — the Manville Personal Injury Settlement Trust established the template that Congress later codified[5]
- Payment reduced from 100% to 5.1% — the Manville Trust's dramatic decline illustrates why actuarial projections and periodic adjustments are required[5]
- FACT Act (H.R. 982) — passed the House 221-199 in 2013 but never became law, proposing quarterly public reporting of trust payments[6]
- 3-6 month typical processing — most expedited mesothelioma trust claims are resolved within one to two fiscal quarters[4]
Key Facts
| Metric | Finding |
|---|---|
| Statutory Authority | 11 U.S.C. § 524(g), enacted by Congress in 1994 as part of the Bankruptcy Reform Act[2] |
| Active Asbestos Trusts | More than 60 trusts currently operating under Section 524(g) authority (RAND Corporation, 2024)[4] |
| Total Trust Assets | Over $30 billion set aside across all active asbestos bankruptcy trusts (GAO estimate)[4] |
| Mesothelioma Scheduled Values | Range from $7,000 to $1.2 million per trust depending on trust size and disease category[4] |
| Median Mesothelioma Value | Approximately $180,000 before payment percentage adjustments are applied[4] |
| Multi-Trust Average Payout | Estimated $300,000–$400,000 total across multiple trusts per mesothelioma claimant[1] |
| Johns-Manville Payment Percentage | Declined from 100% (1988) to 5.1% (2024) due to claims exceeding projections (Johns-Manville Trust Annual Report)[5] |
| Supermajority Approval Threshold | 75% of current claimants and two-thirds of all voting claimants must approve the trust plan[2] |
| Largest Single Trust | Owens Corning/Fibreboard Trust at approximately $5.25 billion in combined initial funding[1] |
| Expedited Claim Processing | 3–6 months typical processing time for mesothelioma claims using expedited review[4] |
| FACT Act House Vote | H.R. 982 passed 221–199 on November 13, 2013, but never became federal law[6] |
| First Trust Established | Johns-Manville Personal Injury Settlement Trust, consummated November 28, 1988[5] |
What Problem Did Section 524(g) Solve?
By the early 1990s, asbestos litigation had become the largest and most complex mass tort in American history. Hundreds of companies that had manufactured, distributed, or installed asbestos-containing products faced an ever-growing wave of personal injury claims from workers who had been exposed to asbestos fibers over careers spanning decades.[1]
The fundamental challenge was that asbestos-related diseases — particularly mesothelioma — have latency periods of 20 to 50 years between exposure and diagnosis. This meant that even after a company stopped manufacturing asbestos products, new claimants would continue to emerge for decades. Traditional bankruptcy proceedings provided no mechanism to address this ongoing stream of future claimants who had been exposed but not yet diagnosed.[3]
Before Section 524(g), companies facing asbestos liability had limited options. Some attempted to use standard Chapter 11 reorganization, but courts struggled with how to provide for the rights of individuals who did not yet know they were injured. Others attempted negotiated settlements, but the sheer volume of claims — numbering in the hundreds of thousands — made individual resolution impractical.[2]
Congress enacted Section 524(g) specifically to address these challenges, drawing on the judicial innovations developed in the Johns-Manville bankruptcy case that had demonstrated the viability of trust-based compensation systems.[2]
What Is the Johns-Manville Trust?
The Johns-Manville Corporation bankruptcy is the foundational case in asbestos trust law. As the largest asbestos manufacturer in the world, Johns-Manville's bankruptcy filing and subsequent trust creation provided the template that Congress codified in Section 524(g).[5]
Timeline
| Date | Event |
|---|---|
| August 1982 | Johns-Manville Corporation files for Chapter 11 bankruptcy — the first major asbestos company to do so |
| November 28, 1988 | Plan of Reorganization consummated; Manville Personal Injury Settlement Trust authorized to begin paying pre-bankruptcy claims |
| December 31, 1988 | Trust has settled over 12,600 claims for almost $500 million and paid 1,200 claimants over $50 million. Claims paid at 100% of settlement value in FIFO order |
| Mid-1989 | An additional 48,500 post-bankruptcy claims received — far exceeding projections |
| January 1992 | More than 190,000 claimants seeking compensation (original Plan predicted only 83,000–100,000 total claims) |
| 1994 | Congress enacts Section 524(g), codifying the Manville trust model into federal law |
| 1995 | Revised Trust Distribution Process (TDP) establishes pro rata distribution at initial level of 10% of total liquidated claim value |
| 2024 | Johns-Manville Trust claims paid at 5.1% of scheduled value — down from the original 100% |
Lessons from the Manville Experience
The dramatic reduction in payment percentages — from 100% of claim value in 1988 to 5.1% in 2024 — illustrates the fundamental challenge of asbestos trust funding. The original Manville Plan dramatically underestimated the total number of future claims, projecting 83,000 to 100,000 total claimants when the actual number exceeded 190,000 within just four years.[5]
This experience informed the design of Section 524(g), which requires trusts to use actuarial projections and periodic payment percentage adjustments to ensure that funds remain available for future claimants who may not be diagnosed for decades.[1]
How Does Section 524(g) Work?
Section 524(g) establishes a specific legal framework that asbestos-burdened companies must follow to create a trust and obtain the channeling injunction that protects the reorganized company from future asbestos litigation.[3]
Key Requirements
To establish a Section 524(g) trust, the bankruptcy plan must include:[2][3]
1. Trust Funding: The reorganized debtor must transfer assets to the trust sufficient to pay present and future asbestos claims. Funding sources typically include cash, stock or equity in the reorganized company, insurance rights, and ongoing revenue streams.
2. Channeling Injunction: The plan must include an injunction that channels all present and future asbestos-related claims to the trust, barring claimants from suing the reorganized company directly. This is the critical mechanism that allows the company to emerge from bankruptcy as a viable entity.
3. Future Claims Representative: An independent legal representative must be appointed to protect the interests of future claimants — individuals who have been exposed to asbestos but have not yet been diagnosed with an asbestos-related disease.
4. Supermajority Approval: At least 75% of current claimants whose claims have been allowed must vote in favor of the plan, and at least two-thirds of all voting claimants must approve it.
5. Court Findings: The bankruptcy court must find that the trust is funded in compliance with the plan, that the trust will operate through mechanisms such as qualified settlement funds, and that the debtor is likely to be subject to substantial future asbestos demands.
The Channeling Injunction
The channeling injunction is the most distinctive feature of Section 524(g). Unlike a standard bankruptcy discharge that eliminates debts, the channeling injunction does not eliminate asbestos claims — instead, it redirects them from the courtroom to the trust.[3]
This means that asbestos victims retain their right to compensation, but they must pursue that compensation through the trust's claim review procedures rather than through traditional tort litigation against the reorganized company. The trust assumes the company's liability for all asbestos-related claims, both known and unknown at the time of reorganization.[1]
| "Section 524(g) trusts represent a critical compensation mechanism for mesothelioma patients. Filing claims with multiple trusts can significantly increase the total compensation a patient and their family receives." |
| — Paul Danziger, Attorney, Danziger & De Llano |
What Are Trust Distribution Procedures?
Each Section 524(g) trust establishes its own Trust Distribution Procedures (TDPs) that define how claims are evaluated, valued, and paid. While each trust's TDP is unique, they generally follow a common framework.[4]
Two Review Processes
Expedited Review: Claims are categorized by disease type (mesothelioma, lung cancer, asbestosis, etc.) with a predetermined scheduled value for each category. Claimants who meet the basic medical and exposure criteria receive the scheduled value multiplied by the trust's current payment percentage. Most mesothelioma claims use expedited review for speed of processing.[4]
Individual Review: Claims undergo case-by-case evaluation considering additional factors such as disease severity, number of dependents, specific exposure history, jurisdiction, and other individual circumstances. Individual review may result in payments higher or lower than the expedited review scheduled value, depending on the strength of the claim.[4]
Mesothelioma Claim Values
| Metric | Value |
|---|---|
| Claim Value Range | $7,000 to $1.2 million per trust |
| Median Value | Approximately $180,000 |
| Average Total Payout | Estimated $300,000–$400,000 across multiple trusts |
| Typical Processing Time | 3–6 months |
Payment Percentages
Trusts apply a payment percentage to each claim's scheduled value to preserve funds for future claimants. For example, if a mesothelioma claim has a scheduled value of $180,000 and the trust's payment percentage is 25%, the actual payment would be $45,000.[4]
Payment percentages are reviewed and adjusted periodically by trust administrators and the trust advisory committees (consisting of claimant representatives and a futures representative). Some trusts maintain relatively high payment percentages (50% or above), while others have reduced payments substantially as claims have exceeded initial projections — as seen with the Johns-Manville Trust's reduction from 100% to 5.1%.[5][4]
What Are the Largest Asbestos Trusts?
More than 60 active Section 524(g) trusts operate today. Major trusts include:[4][1]
| Trust Name | Initial Funding | Parent Company |
|---|---|---|
| USG Corporation Trust | $3.9 billion | USG Corporation (drywall, insulation) |
| Pittsburgh Corning Trust | $3.4 billion | Pittsburgh Corning (pipe insulation) |
| W.R. Grace Trust | $2.978 billion | W.R. Grace (Zonolite insulation) |
| Johns-Manville Trust | ~$2.5 billion (initial) | Johns-Manville Corporation |
| Owens Corning/Fibreboard Trust | ~$5.25 billion (combined) | Owens Corning Fiberglas |
| Armstrong World Industries Trust | ~$2.1 billion | Armstrong (flooring, insulation) |
| DII Industries / Halliburton Trust | ~$4.2 billion | Halliburton / Dresser Industries |
Additional trusts include Western Asbestos, Babcock & Wilcox, Celotex, Eagle-Picher, National Gypsum, and many others. Most mesothelioma patients are eligible to file claims with multiple trusts based on their specific exposure history.[7]
What Is the FACT Act Transparency Debate?
The Furthering Asbestos Claims Transparency (FACT) Act (H.R. 982) has been a focal point of legislative debate over asbestos trust transparency. The Act was passed by the U.S. House of Representatives on November 13, 2013, by a vote of 221–199.[6]
What the FACT Act Would Require
The proposed legislation would require asbestos trusts to:[8]
- File quarterly reports with courts detailing each demand for payment and the basis for each payment
- Make reports available on the public docket
- Respond to informational requests from defendants in asbestos tort litigation
Arguments For and Against
Proponents argue that transparency requirements would curb instances of double-dipping — where claimants allegedly receive compensation from both trusts and tort litigation for the same exposure — and would help detect fraudulent claims that inflate costs for all parties.[8]
Critics counter that the FACT Act would create significant privacy violations by exposing the personal medical and financial information of asbestos victims on the public record. They further argue that the disclosure requirements would slow claim processing and chill legitimate claims from workers and families who fear public exposure of their medical conditions.[6]
State-Level Transparency Laws
While the FACT Act has not become federal law, multiple states have enacted their own trust claims transparency legislation. States including Illinois, New York, Texas, and West Virginia now require disclosure of trust claims in ongoing tort litigation and permit setoffs — deductions from jury verdicts or settlements based on trust payments the claimant has received or is eligible to receive.[4]
How Do Claimants File Trust Fund Claims?
Filing claims with asbestos trusts typically requires documentation of three elements: medical diagnosis, exposure history, and evidence linking the exposure to the specific company whose trust is being claimed against.[1][9]
Required Documentation
- Medical evidence: Pathology reports, imaging studies, physician diagnosis confirming mesothelioma or other asbestos-related disease
- Exposure evidence: Work history, employer records, union records, co-worker affidavits documenting exposure to the specific company's asbestos-containing products
- Product identification: Evidence that the claimant worked with or around the specific asbestos products manufactured by the trust's parent company
Filing Process
Most claimants work with experienced mesothelioma attorneys who handle trust fund claims as part of a comprehensive compensation strategy. An attorney familiar with the trust system can identify all trusts for which a client may be eligible, prepare the necessary documentation, and navigate the claim review process to maximize total compensation.[1]
| Important: Filing trust fund claims does not prevent a mesothelioma patient from also pursuing litigation against solvent companies that have not filed for bankruptcy. Many patients pursue both trust claims and tort litigation simultaneously to maximize their total compensation. |
| ⚠ Statute of Limitations Warning: Filing deadlines vary by state from 1-6 years from diagnosis. Texas allows 2 years from diagnosis or discovery. Contact an attorney immediately to preserve your rights. |
Frequently Asked Questions
How do I file a trust fund claim?
Filing a trust fund claim requires submitting medical documentation confirming an asbestos-related diagnosis, evidence of exposure to the specific company's products, and product identification linking the claimant to the trust's parent company. Most claimants work with experienced mesothelioma attorneys who identify all eligible trusts and prepare the necessary documentation.[1]
What is a channeling injunction?
A channeling injunction is the core mechanism of Section 524(g) that redirects all present and future asbestos-related claims away from the reorganized company and into the bankruptcy trust. Unlike a standard bankruptcy discharge, the channeling injunction does not eliminate claims — it channels them to a dedicated compensation fund so victims retain their right to recovery.[3]
How long does trust fund processing take?
Most expedited mesothelioma trust fund claims are processed within 3 to 6 months. Individual review claims, which involve case-by-case evaluation of factors like disease severity and exposure history, may take longer. Processing times vary by trust based on claim volume and administrative capacity.[4]
Can I file with multiple trusts?
Yes. Most mesothelioma patients were exposed to asbestos products from multiple manufacturers over the course of their careers. An experienced attorney can identify all trusts for which a claimant is eligible, and filing with multiple trusts can significantly increase total compensation — often reaching $300,000 to $400,000 or more combined.[1]
What documentation do I need?
Trust fund claims typically require three categories of evidence: medical records confirming a mesothelioma or asbestos-related disease diagnosis, employment and exposure history documenting contact with the specific company's products, and product identification evidence such as co-worker affidavits or union records linking exposure to the trust's parent company.[9]
Why do payment percentages change?
Payment percentages are periodically adjusted by trust administrators and advisory committees to ensure that funds remain available for future claimants who may not be diagnosed for decades. When actual claims exceed initial actuarial projections — as happened with the Johns-Manville Trust, which dropped from 100% to 5.1% — trusts must reduce payment percentages to preserve long-term solvency.[5]
What is the FACT Act?
The Furthering Asbestos Claims Transparency (FACT) Act (H.R. 982) was proposed legislation that would have required asbestos trusts to file quarterly public reports detailing each claim payment. The bill passed the House 221–199 in 2013 but was never enacted into law. Critics argued it would violate claimant privacy and slow claim processing.[6]
Do trust fund payments affect my lawsuit?
Filing trust fund claims does not prevent a mesothelioma patient from also pursuing litigation against solvent companies that have not filed for bankruptcy. However, some states have enacted setoff laws that allow defendants in tort litigation to reduce jury verdicts or settlements by the amount of trust payments the claimant has received or is eligible to receive.[4]
Quick Statistics
- $37 billion+ — estimated total amount paid out by all asbestos bankruptcy trusts since the first was established in 1988[4]
- 190,000+ claims — the number of claimants seeking compensation from the Johns-Manville Trust by January 1992, nearly double the original projection of 83,000–100,000[5]
- 48,500 post-bankruptcy claims — additional claims received by the Manville Trust by mid-1989, far exceeding actuarial projections[5]
- $3.9 billion — initial funding of the USG Corporation Trust, the largest single-company asbestos trust[1]
- $4.2 billion — DII Industries/Halliburton Trust initial funding, one of the largest trust settlements in American corporate history[1]
- 4 states with setoff laws — Illinois, New York, Texas, and West Virginia require disclosure of trust claims in ongoing tort litigation[4]
- 2/3 voting threshold — in addition to the 75% supermajority, at least two-thirds of all claimants who vote must approve a Section 524(g) trust plan[2]
- 12,600 claims settled — the number of claims the Manville Trust had resolved by December 31, 1988, paying almost $500 million at 100% of settlement value[5]
- 100% to 5.1% — the range of the Johns-Manville Trust payment percentage decline from 1988 to 2024, the most dramatic reduction of any major asbestos trust[5]
- 1982 to present — the span of asbestos company bankruptcies, beginning with Johns-Manville and continuing with new trusts still being formed[1]
Get Help
- Danziger & De Llano — Call (855) 699-5441 for a free mesothelioma case evaluation
- Mesothelioma Lawyers Near Me — Free attorney-matching quiz and case review
- Mesothelioma.net — Patient resources and compensation information
Related Resources
- Asbestos Trust Funds Overview
- Johns-Manville Trust
- W.R. Grace Trust
- Borel v. Fibreboard (1973)
- Mesothelioma Settlements
- Choosing a Mesothelioma Attorney
|
Free, Confidential Case Evaluation Call (855) 699-5441 or visit dandell.com/contact-us No upfront fees • Experienced representation • National practice |
References
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 Danziger & De Llano, Mesothelioma Attorneys
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Section 524(g) Bankruptcy Trusts and Asbestos Compensation, Mesothelioma Lawyer Center
- ↑ 3.0 3.1 3.2 3.3 3.4 3.5 3.6 Asbestos Trust Fund Claims and the Channeling Injunction, Danziger & De Llano
- ↑ 4.00 4.01 4.02 4.03 4.04 4.05 4.06 4.07 4.08 4.09 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 Asbestos Trust Funds: How to Receive a Mesothelioma Payout, MesotheliomaAttorney.com
- ↑ 5.00 5.01 5.02 5.03 5.04 5.05 5.06 5.07 5.08 5.09 5.10 5.11 History of the Manville Trust, Manville Personal Injury Settlement Trust
- ↑ 6.0 6.1 6.2 6.3 6.4 Asbestos Trust Fund Information, Mesothelioma Lawyer Center
- ↑ MesotheliomaAttorney.com, Asbestos Legal Resources
- ↑ 8.0 8.1 FACT Act and Asbestos Trust Fund Transparency, MesotheliomaAttorney.com
- ↑ 9.0 9.1 Mesothelioma Lawyer Center, Legal Resources for Asbestos Victims
External Links
- Asbestos Bankruptcy Trusts: Rights, Claims & Compensation | Mesothelioma Encyclopedia
- www.rand.org
- www.hkporterasbestostrust.org
- [https://files.blogs.illinois.edu/files/7000/92638289/230772.pdf New York Court Holds that �Future� Asbestos Claims Can Be Discharged Without a Trust | ABI]